BioSphere Medical to merge with Merit Medical Systems, Merit BioAcquisition

BioSphere Medical, Inc. (NASDAQ: BSMD) ("BioSphere Medical" or the "Company") - the pioneer in the use of bioengineered microspheres to treat uterine fibroids, hypervascularized tumors and vascular malformations by a minimally invasive, image-guided medical procedure called embolotherapy - today reported that it has entered into an a definitive agreement and plan of merger with Merit Medical Systems, Inc. (NASDAQ: MMSI) and Merit BioAcquisition Co., a wholly-owned subsidiary of Merit Medical pursuant to which BioSphere Medical will merge with and into Merit BioAcquisition Co. in a cash transaction valued at approximately $96 million.

“Merit Medical Systems' strong reputation and experience in interventional radiology and extensive worldwide distribution network make it an ideal fit for BioSphere. This transaction achieves significant value for our shareholders. Furthermore, through Merit, more women suffering from uterine fibroids will benefit from the less invasive treatment solution offered by embolotherapy.”

In connection with but prior to the consummation of the transaction, BioSphere Medical intends to call for redemption all 9,636 currently outstanding shares of series A preferred stock at a redemption price of $1,000 per share plus accrued but unpaid dividends. Holders may elect to convert each share of series A preferred stock into 250 shares of common stock prior to consummation of such redemption. Under the terms of the agreement, and assuming the conversion of all outstanding shares of series A preferred stock into shares of common stock, at closing each share of BioSphere Medical common stock will be exchanged for $4.38 per share in cash, representing a premium of approximately 54% over the closing price on May 12, 2010.

David P. Southwell, Chairman of BioSphere Medical, said, "Merit Medical Systems' strong reputation and experience in interventional radiology and extensive worldwide distribution network make it an ideal fit for BioSphere. This transaction achieves significant value for our shareholders. Furthermore, through Merit, more women suffering from uterine fibroids will benefit from the less invasive treatment solution offered by embolotherapy."

"We are pleased to bring value to BioSphere shareholders through this planned acquisition. We look forward to effectively integrating into Merit, and we believe that this transaction will allow us to even more fully meet the needs of our customers," said Richard Faleschini, BioSphere Medical's president and chief executive officer.

The transaction was unanimously approved on May 13, 2010 by BioSphere Medical's Board of Directors. Completion of the transaction is subject to approval of BioSphere Medical stockholders, regulatory approvals and other customary closing conditions and is expected to occur early in the third quarter of 2010.

J.P. Morgan Securities Inc. is acting as financial advisor, and WilmerHale LLP is acting as legal counsel, to BioSphere Medical.

Also today, BioSphere Medical reported its financial results for the three months ended March 31, 2010.

Total worldwide revenue for the first quarter of 2010 was $7.12 million, compared with $7.28 million in the first quarter of 2009, a decline of 2%. Total revenue in the first quarter of this year includes $0.08 million from Nippon Kayaku, the Company's distribution partner in Japan. There was no revenue from Nippon Kayaku in the first quarter of 2009 as this agreement began in April 2009. First quarter 2010 results included licensing revenue of $0.02 million, compared with $0.10 million last year. Worldwide revenue from embolics and delivery systems was $7.02 million in the quarter, a decline of 2% from the prior year.

U.S. sales of embolics and delivery systems were $5.44 million in the first quarter, compared with $5.69 million in the same period of 2009. Revenue from embolics and delivery systems in Europe, the Middle East and Africa (EMEA) was $1.00 million in the first quarter, compared with $1.16 million in the same period of 2009.

In Emerging Markets outside of the United States and EMEA, revenue from embolics and delivery systems was $0.58 million for the first quarter of 2010, compared with $0.34 million in the first quarter of 2009, an increase of 71%. Revenue in China was $0.15 million, up 11%, and revenue in Brazil was significantly higher, at $0.34 million, up 232%.

Gross profit for the first quarter of 2010 was $5.33 million, or 74.9% of revenue, compared with gross profit of $5.44 million, or 74.7% of revenue, for the first quarter of 2009.

Operating expenses for the first quarter of 2010 were $6.66 million, compared with $7.29 million for the first quarter of 2009. The decrease was primarily due to a reduction in research and development expense in connection with the conclusion of our manufacturing improvement program in the first quarter of 2009 and to lower incentive compensation expense resulting from lower than expected sales in the first quarter of 2010.

Operating loss for the first quarter of 2010 narrowed to $1.33 million from $1.84 million in the same period of 2009, a reduction of 28%.

Foreign exchange gain for the first quarter of 2010 was $0.22 million compared with $0.20 million for the same period last year, due to higher euro denominated intercompany trade payables.

The Company recorded an income tax benefit of $0.03 million during the quarter from the French economic stimulus program.

The quarterly preferred stock dividend for the first quarter of 2010 was $0.15 million, unchanged from the first quarter of 2009.

Net loss applicable to common stockholders narrowed by 31% for the first quarter of 2010 to $1.23 million or $0.07 per share, compared with a net loss applicable to common stockholders of $1.79 million or $0.10 per share in the same period last year.

As of March 31, 2010, BioSphere Medical had cash, cash equivalents and marketable securities of $16.56 million, compared with $18.09 million at December 31, 2009.

Sales by therapeutic area in the first quarter of 2010 were as follows:

• Worldwide sales of embolics used in interventional gynecology, or UFE, were $5.00 million, compared with $5.25 million in the first quarter of 2009. This includes U.S. sales of $4.07 million, compared with $4.35 million in the comparable year-ago quarter and sales outside of the U.S. of $0.93 million, compared with $0.90 million in the prior year. The slower sales in UFE is believe to be principally due to the continued high unemployment rate, which the Company believes has had the effect of reducing demand for elective procedures such as UFE.
• Worldwide sales of embolics used in interventional oncology rose 4% to $1.66 million compared with $1.60 in the prior year. This includes U.S. sales of $1.23 million, up from $1.16 million, and sales outside of the U.S. of $0.43 million, compared with $0.44 million in the prior year. The Company believes sales in the United States were impacted somewhat due to the scarcity of Ethiodol, a third-party product used by doctors with the Company's Embosphere Microspheres during conventional transarterial chemoembolization procedures, or cTACE. On May 11, 2010, the FDA announced that Guerbet LLC has acquired the Ethiodol NDA from Nycomed U.S., Inc. effective May 7, 2010 and that Guerbet is working with FDA to resume manufacturing of Ethiodol in the near future to ensure continued availability for U.S. patients. The Company does do not know whether or when Ethiodol will become available for sale again in the U.S. for cTACE procedures. The Company also continues to work with the FDA to obtain an approval for a study using its QuadraSphere® Microspheres for the treatment of primary liver cancer. Based on discussions with the FDA, the Company has determined that the study protocol will include as a primary endpoint patient survival. Furthermore, the Company is continuing to discuss with the FDA the protocol requirements for the trial, and thus has not yet determined whether or when to undertake the clinical trial.
• Worldwide sales of delivery systems were $0.36 million for the quarter, which includes U.S. sales of $0.14 million and sales outside of the U.S. of $0.22 million. This is up 8% from worldwide sales of $0.33 million in the prior year.